A selection of weekly articles by top Bahamian commentators.

August 08, 2012

The Very Strange World of Gambling in the Bahamas

by Larry Smith

When I was young, people called me a gambler. As the scale of my operations increased I became known as a speculator. Now I am called a banker. But I have been doing the same thing all the time. -- Sir Ernest Cassel (1852-1921)

In gambling, the many must lose in order that the few may win. -- George Bernard Shaw (1856-1950)

The gambling debate in the Bahamas has always been surreal - part of a weird fantasy world that is difficult to navigate with logic.

There are two zones to this strange world - one in which three or four hotel casinos operate legally as tourist amenities, and another populated by hundreds of illegal Numbers sellers catering to tens of thousands of Bahamian gamblers.

The casino zone originated in the 1920s, when Prohibition in the US offered a chance to make huge profits from bootlegging. Money flowed freely, and millions were invested in real estate, with new resorts like the Colonial and Montagu Hotels coming on stream.

Although organized gambling was officially banned nationwide, a small casino called the Bahamian Club began operating seasonally in 1920 on New Providence, catering to a very restricted clientele. It was located on West Bay Street, east of Fort Charlotte.

The Numbers zone dates back to 16th century Europe and has been thriving here since the 1800s at least. This game of chance is associated with poor communities around the world because punters can bet small sums of money and get credit from their bookies.

Our first anti-gambling law was passed in 1901, and was gradually strengthened to create an absolute ban on the operation of lotteries and gaming houses for profit. But in 1939 the law was amended to allow exceptions to this rule.

According to the 1967 Commission of Inquiry on casino gambling, "This change...was prompted by the opening of a small casino on a seasonal basis at Cat Cay and the realisation by those in government at that time that this venture - and a casino which had been openly operated since 1920 at the Bahamian Club on the western outskirts of Nassau - were quite illegal."

The amendment - piloted by a young lawyer named Stafford Sands - allowed the government to exempt any person, club or charity from the law's provisions. The effect was to create a licensing procedure, and the two small foreign-owned casinos were immediately regularized.

These early certificates of exemption carried few conditions, but they always excluded minors, persons born here, employed residents, and civil servants from gambling. Only visitors and non-Bahamian retirees living here could legally gamble in the casinos.

Between 1939 and 1963 there were several applications for casino licenses from reputable groups. But all were denied on the basis that the exemption law was not designed to provide for the introduction of casino gambling on a large scale or on a permanent basis.

"It was regarded primarily as a means of permitting lotteries for charitable purposes or to provide for the sort of small lottery or gaming activity which is a feature of specific social functions," the inquiry report said. "The discreet seasonal operations of the two existing casinos do not appear to have been regarded as offending the spirit of the 1939 legislation."

In 1964 Shirley Oakes Butler (a daughter of Sir Harry Oakes) tried to acquire the Bahamian Club to operate as a year-round casino, with half the profits earmarked for charity. But plans were already in place to transfer the club's exemption to a new casino in Freeport.

The following year a group of top hoteliers met with Stafford Sands (who was then Tourism Minister) to propose a government-controlled casino and convention centre, from which the entire industry could benefit. But planning was already in hand for a private hotel casino on Paradise Island.

This dramatic expansion of casino gambling (in Freeport and on Paradise Island) was a direct result of the Cuban Revolution, which had forced American casino operators to look for new territory. The Bahamas was right next door, and the developers of Freeport were desperate to build a resort industry on the island of Grand Bahama.

The United Bahamian Party government saw this demand as a chance to earn payoffs from foreign gambling syndicates while boosting the country's attraction as a tourist destination. But the pro-casino policy promoted by Sands and others was hugely controversial due to intense opposition from the powerful religious community.

When the Progressive Liberal Party took office in 1967 it continued the exemptions for casinos on Grand Bahama and Paradise Island, but passed a new law in 1969 to set up a regulatory agency (the Gaming Board) and provide for the taxation of casinos. Restrictions on Bahamians and residents gambling in casinos were left unchanged.

Some commentators have claimed that these restrictions were racially motivated, but the record is clear that they were the result of opposition from the churches - an attempt to insulate the issue from public concern in the belief that casinos were important for the economy. Bahamians of any race have always been able to be entertained in our hotel casinos - they just can't gamble.

No efforts to challenge this bizarre status quo have gone anywhere over the past 50 years. Casinos remain legal but Bahamians cannot use them legally, while the Numbers racket is illegal but patronized by most Bahamians without any consequence whatsoever.

The last Free National Movement administration floated the idea of a referendum to change this by legalising lotteries and ending the ban on Bahamians gambling in casinos. But former Prime Minister Hubert Ingraham eventually backed off in deference to the views of the Christian Council. He promised a referendum in his next term, should he be re-elected.

The PLP promised the same thing. And Prime Minister Perry Christie has confirmed that a referendum on the matter will be held before the end of this year. This move is widely seen as a payback to the Numbers operators for their funding of the PLP's recent election campaign, but it will hopefully bring some clarity to a long-running and very peculiar debate.

Aside from a few Islamic countries, the Bahamas is almost alone in not permitting its citizens to gamble in one form or another. According to the Economist magazine, the legal gambling market totalled $335 billion globally in 2009. Nearly two-thirds of that came from lotteries and casinos. There are publicly operated lotteries in at least 100 countries these days.

Meanwhile, online gaming is valued at about $30 billion, and growing fast. Just as the Internet disrupted other business models, it is also changing the gambling industry. Over the last decade, anyone who had an internet connection and wanted to gamble was able to do so.

This is why web shops are able to operate openly here. The Lotteries & Gaming Act makes no reference to internet gambling because there was no internet when it was passed in 1969. So these businesses are licensed and legal. The law does refer to the printing and selling of tickets or chances in a lottery or drawing, and this is what makes the Numbers draw illegal.

Retired assistant police commissioner Paul Thompson told me recently that one of his first postings as a young officer in 1952 was to a special squad of detectives that raided the Numbers houses. "We did it from time to time, but it never stopped anything, and after a while CID left it to the uniform branch. We considered it more important to focus on serious crime."

And it has been that way ever since - occasional raids, followed by long spells of non-interference. In fact, at one time, the biggest Numbers boss on the island was the treasurer of the PLP. And it is common knowledge that you can go almost anywhere today and buy numbers easily and painlessly. As one letter writer recently put it, "the Numbers has become intricately woven into the fabric of Bahamian society."

In 2006, Minister of Tourism Obie Wilchcombe reported that there were at least 45 illegal gambling houses on New Providence and 12 on Grand Bahama. He said 60 per cent of the population was spending as much as $2 million locally and abroad on games of chance every week. We don't know how accurate this is or how much of this revenue is retained as profit in the Bahamas.

But we do know about the legal casino zone. According to the Ministry of Tourism, hotel casinos in the Bahamas netted just over 14 per cent on revenues of more than $1 billion in 2011. While there is no way to know what the Numbers operators earn, it is clearly a hugely profitable business with no regulatory oversight other than the occasional fine or political contribution.

Our 'official' attitude towards gambling parallels the American experience up to a point. Restrictions were gradually strengthened in the US during the 19th century in response to abuses, so that by 1910 virtually all forms of gambling were prohibited - even bingo.

But attitudes began to change during the Depression, when legalized gambling was seen as a way to stimulate the economy. Growing opposition to tax increases helped to establish state-run lotteries in the second half of the 20th century. Today, 43 states have lotteries, mostly marketed as voluntary taxes for education, and 12 allow commercial casinos.

So what are the key issues in the Bahamian gambling debate?

Let's start with the economic argument. Many politicians see legalization as an easy way to extract more revenue from the private sector. It has been said that the government could gain an extra $40 million a year in revenue from a legal lottery.

But this would not be a matter of "pumping more money into the economy" as some have suggested. It instead amounts to a simple transfer of money via a voluntary tax on gamblers, many of whom will gamble whether the lottery is legal or illegal.

Those opposed to prohibition point to concerns about enforcement costs, not to mention the huge incentives to lobby and bribe public officials to allow illegal gambling to continue unmolested. These arguments are similar to those made about the prohibition of drugs and alcohol, which are also subject to abuse.

Clearly, any widespread demand for an illicit activity will create an illicit market. Prohibition of alcohol made smugglers rich but did nothing to curb drinking. Outlawing drugs has been a similarly spectacular failure, draining billions of public funds for enforcement costs.

Legalisation and regulation would reduce government expenditures through the elimination of enforcement measures, proponents say. But it is more likely that the enforcement burden would simply shift from prohibiting gaming to ensuring that the operations are free from corruption and rigging - a much more complicated task.

Religious fundamentalists argue that gaming is a sin based on greed, although there is no biblical injunction against it. As Pastor Rex Major once put it, "Gambling encourages a reckless parasitic approach to life in which one human fleeces another with no personal regard for his neighbor’s welfare."

But some denominations are less bothered than others, and it could be said that this high-flown moral argument amounts to arch hypocrisy in the face of widespread illegal gambling on a daily basis by Baptist congregants and others.

The social argument against gambling is that it exploits the poor, who waste their limited resources on rigged games. In this view, gambling corrupts and hurts people, causing absenteeism, financial hardships, family tensions and increased crime to support the habit.

In Russia, for example, the government shut down the gambling industry overnight in 2009 to control spiraling addiction and organised crime. Only a handful of Las Vegas-style casino zones are now allowed in isolated areas. Prior to the ban, Moscow alone had 550 gaming halls, including 30 casinos.

The gambling industry argues that its product is simply a form of entertainment, like going to the movies. And locally, our web shop owners (and presumably the Numbers chiefs) are running ads extolling the virtues of gaming in terms of employment and their contributions to charity.

There is also the question of discrimination. Some people are justifiably upset over the fact that Bahamians are not allowed to gamble in Bahamian casinos. But the Christie administration has said that its proposed referendum will not address this issue, allowing this ban to continue indefinitely.

If a majority votes against the legalization of lotteries in the upcoming referendum, the question of what to do with the existing illegal Numbers industry will remain. If legalization is approved by voters, the government will have to enact legislation to regulate the industry.

Some commentators have suggested that a 'no' vote in the referendum will place the Christie administration in an awkward position in terms of what to do with the Numbers business. But why should that be the case? We would simply revert to the original surreal status quo.

A 'yes' vote would force the government to develop and implement a comprehensive gambling infrastructure with a transparent regulatory regime. Exactly how this would impact or incorporate the existing Numbers operators is difficult to say because the government has given no clues to its thinking.

The bottom line is which approach - prohibition or regulation - will provide the most benefits to the most Bahamians at the least cost. Either way, gambling will continue.

Comments

Well, that's a nice history lesson but void of any real conclusions, opinions or recommendations.

Also, as the Bahamas Blog on BahamasB2B.com pointed out, the real problem is what to do with the current numbers bosses. The men are criminals. To just allow them to walk away, rich, or to hand them the lottery to manage, sets the same bad example as drugs did in the 1980's... the "crime pays" mentality that has so corrupted and perverted our society.

To arrive at conclusions, we first need comprehensive information and context. This is the gap that the local media rarely fills. I don't talk off the top of my head - I produce news features. My preliminary view can be found in the final paragraph. However, your point about the Numbers chiefs is well taken.

"which approach - prohibition or regulation - will provide the most benefits to the most Bahamians at the least cost". Are Numbers and the Lottery the same thing? As for Vegas gamblng, there are no benefits to Bahamians, because "the House always Wins". With the Lottery, people don't go way overboard with that because it's not commercialized. They don't put special odours on the carpet to make people gamble more, etc.

It all depends on how the government implements. Casinos are an important attraction for visitors and they are also pay taxes - so they do provide benefits for Bahamians. Will the government simply regularise the existing numbers industry? Will they contract the numbers chiefs to operate a national lottery? Will the Numbers chiefs face any penalties for their criminal behaviour up to this point? We don't know anything. My guess is they hope it will fail so they don't have to be bothered any more and so they don't have to offend their Baptist backers.

If a lottery is run centrally it can provide the population with much needed extra funds for good national causes that the government can't manage. Nearly all the British athletes have been funded through the national lottery and that seems to have worked. How you deal with an existing gaming industry is going to be the big problem though. The Bahamian Club was in Thunderball wasn't it?

What I don’t understand is how Bahamians have allowed the numbers men to operate with impunity for so long. Multi-millionaires, often beloved and held in high regard, IMO all due to illicit gains. The religious aspect of this argument baffles me, as so many good Christians hold accounts at web shops and almost any five year old can tell you how to box a number. Let’s face it – the perpetual debate filled with moral error has resulted in no significant improvement for the average Bahamian. Legalize numbers – introduce regulations and tax the numbers men.